When push comes to shove, many think Cleveland Fed’s new president will be hawkish

Although they admit the evidence in thin, economists think that Loretta Mester, the new Cleveland Federal Reserve Bank president, will lean hawkish. The view is based on pedigree. Mester comes from the Philadelphia Fed, a traditional bastion of hawks, and now headed by Charles Plosser, who has opposed the last two round of Fed asset purchases and is a strong advocate for retraining Fed discretion through formal rules.

“I think she’ll be slightly hawkish, but not nearly as much as Plosser,” said Michael Feroli, chief U.S. economist at J.P. Morgan Chase.

When she joins the Fed’s policy making committee in June, Mester will have an immediate vote.

Richard Fisher, the president of the Dallas Fed, and one of the most hawkish Fed presidents, said in an interview that Mester views are similar to his and Plosser’s.

Michael Gapen, economist at Barclays, said that”relatively little is known” about Mester’s views on monetary policy. But economists said they have the sense she’ll be pushing for a rate hike sooner than some other Fed officials.

“We do think she’s more on the hawkish side,” said Terry Sheehan, a policy analyst at Stone & McCarthy Research Associates.Mester will replace Sandra Pianalto on the Cleveland Fed. Although often listed as a dove, she was more of a moderate hawk, Sheehan said.

Drew Matus, senior economist at UBS Securities, thinks Mester will be a voice for banking industry on the central bank given her research into regulation.

“If you talk to commercial bankers, many of them would argue that zero interest rates are not a panacea and that moving away from zero interest rates may be helpful,” Matus said.

“Given her background, she could reflect those sentiments,” Matus said.

Ryan Sweet, an economist at Moody’s Analytics, said Fed watchers should be careful to label new Fed officials before they comment on current policy. He said that whatever stripe Mester takes will not impact new Federal Reserve Chairwoman Janet Yellen.

“Yellen has plenty of votes in her pocket to stay on the [monetary policy] course she wants,” Sweet said.